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FDI and Trade Policy Openness in Sub-Saharan Africa

Author

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  • Godfred William Cantah

    (Department of Economics, University of Cape Coast)

  • Gabriel William Brafu-Insaidoo

    (Department of Economics, University of Cape Coast)

  • Emmanuel Agyapong Wiafe

    (Department of Banking and Finance, West End University College)

  • Abass Adams

    (Department of Economics, University of Cape Coast)

Abstract

Trade openness is an important determinant of Foreign Direct Investment (FDI) inflows into Sub-Saharan Africa (SSA). Consequently, studies have examined the relationship between FDI inflows and trade openness. This study develops a new measure of trade openness to re-examine the relationship between FDI inflows and trade policy openness using principal component analysis. This new measure captures the ease of trading activities and trade tariffs. Dynamic panel estimation technique was employed to analyze the relationship between trade policy openness and FDI inflows in SSA countries. The results indicate that an open economy attracts FDI. The study recommends efforts at reducing cost of trade.

Suggested Citation

  • Godfred William Cantah & Gabriel William Brafu-Insaidoo & Emmanuel Agyapong Wiafe & Abass Adams, 2018. "FDI and Trade Policy Openness in Sub-Saharan Africa," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(1), pages 97-116, January.
  • Handle: RePEc:pal:easeco:v:44:y:2018:i:1:d:10.1057_eej.2016.9
    DOI: 10.1057/eej.2016.9
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    FDI; Policy Openness; FDI;
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